Radio Stations Should Pay Recording Artists and Labels

The United States, China, Iran, North Korea and Rwanda are among the handful of countries that do not pay recording artists or their labels when their songs are played on the radio. Instead, stations pay songwriters and music publishers, while the recording artists and labels are compensated in part by airplay’s beneficial effect on record sales.

What happens to this arrangement when people stop buying music? We’re finding out.

As music sales decline, radio’s promotional value disintegrates, and artists and labels question the current policy of giving AM/FM stations a free pass. As a result, Congress has been debating the merits of the Performance Rights bill, which would force terrestrial radio stations to pay the same sort of performance royalties that internet and satellite radio companies already pay.

Representing the SoundExchange-backed musicFIRST organization, Smashing Pumpkins frontman Billy Corgan testified yesterday in favor of the bill at a House Judiciary hearing, which he said "redresses [an] outmoded, unfair practice that favors one participant’s needs over another."

He also echoed our contention that this change in strategy is directly tied to declining music sales.

"As the traditional revenue streams have dried up, most notably in the overall decline of record sales, it has placed stress on who continues to benefit from the old models," testified Corgan. "The future demands new partnerships and a rethinking of long-held practices about how artists should be compensated for their music…Not everyone who hears a song on terrestrial radio buys a ticket or a t-shirt."

Many have reacted negatively to the proposed royalties, mainly (it would seem) on the principle that if the RIAA wants something, that thing must be bad. Plus, stations represented by the National
Association of Broadcasters have argued that if they have to pay these fees, they’ll be less likely to take chances on lesser-known artists. And then there’s the fact that terrestrial radio stations face increased competition from iPods, internet radio, and other areas.

On the other hand, competition is part of business. And most radio stations don’t take many chances on lesser-known artists anyway. Meanwhile, artists and labels who do get played are being told by everyone from airmchair moguls to record execs that they need to diversify their revenue streams and focus on models that don’t rely on selling records.

Forcing stations to pay an annual fee of $5,000 and up for the right to play music makes sense, even if the
RIAA thinks so too.